January Inflation Numbers


The CPI for January showed an annual rate of 1.8%, up 0.5% from December. The market had expected a 0.3% increase, according to Reuters. Across December to January prices fell by 0.3%, whereas they dropped by 0.8% a year ago.

The CPI/RPI gap was unchanged at 0.9%, with the RPI annual rate rising to 2.7%. Over the month, the RPI was down 0.4%.

The Office for National Statistics’ (ONS’s) favoured CPIH index rose 0.4% for the month to 1.8%. The ONS notes the following significant factors across the month:




In six of the twelve broad CPI groups, annual inflation increased, while three categories posted a decrease and the remaining three were unchanged. The category with the highest inflation rate remains in the Communications category, which fell 0.1% to 4.2%.

Core CPI inflation (CPI excluding energy, food, alcohol and tobacco) rose 0.2% to 1.6%. Goods inflation rose 0.7% to 1.3%, while services inflation was up 0.2% at 1.6%.

Producer Price Inflation was +1.1% on an annual basis, up 0.2% on the output (factory gate) measure. Input price inflation increased to 2.1% year-on-year, a 1.2% rise from December. The main driver here – for a change – was imported metal prices, not oil prices (which were the main driver for the output inflation rise).

These inflation figures were higher than expected, but the quirks of energy price capping mean this could be a temporary blip rather than an omen of the end of sub-2% inflation. With earnings growth of 2.9% a year (total pay – 3.2% regular pay only) according to the latest statistics, real earnings growth continues to be positive.

These inflation numbers to some extent vindicate the Monetary Policy Committee’s no change decision on 30 January. The MPC next meets on 25/26 March, by which time it will have another set of inflation statistics and the impact of the Budget to consider.